Altria Group Inc. (MO) reports earnings, stock moves lower

It’s no wonder Altria Group Inc. felt desperate for a piece of e-cigarette maker Juul Labs.

The tobacco giant’s shipment volume has been falling for some time, but the latest numbers show a business decaying faster than investors once thought. AltriaMO, -6.67% saw cigarette volume drop more than 14% to start the year, marking the company’s largest decline in at least three years.

Even after adjusting for factors like trade inventory movements, volume still dropped 7% for the worst adjusted decline in a year. In all, the shipment numbers were “much worse than feared,” wrote Wells Fargo’s Bonnie Herzog.

Altria has been jacking up cigarette prices to compensate for these declines, instituting a “record” hike in February, according to Herzog. While cigarette makers generally have strong pricing power, it remains to be seen just how often companies like Altria can get away with pulling this lever to mask demand issues.

Management remained upbeat about tobacco trends on Altria’s earnings call, with Chief Financial Officer William Gifford saying that smokable and smokeless tobacco were still “performing well” and that the Marlboro brand continues to be “strong and relevant.”

Shares were down in morning trading.

•Comcast Corp.’s CMCSA, +3.21% media business might seem like the more exciting story, but MoffettNathanson’s Craig Moffett said “it’s a good time to be cable.” Comcast increased cable revenue by 4.2%, above the average rate of the past year, and expanded cable margins yet again. Shares were up in Thursday’s session.

On deck this afternoon

Amazon.com Inc.’s AMZN, +0.79% cloud business is a well-known profit engine, but the company’s advertising business is helping margins as well.

The e-commerce giant continues to assert itself in the ad world, eating into budgets that were once reserved for Alphabet Inc.’s Google. Amazon’s “other revenue” category, which mainly consists of the ad business, is expected to grow revenue by 43% in the first quarter, to $2.9 billion, according to Canaccord Genuity’s Maria Ripps.

The company’s overall revenue has been decelerating, a source of some concern to investors, but this slowing growth comes with a silver lining as the cloud and ad businesses expand rapidly. With these more profitable areas making up a greater portion of total revenue, Amazon’s margins will likely benefit, which Ripps expects will “contribute to stock stability.”

•One interesting factor that could contribute to earnings growth for Starbucks Inc. SBUX, +0.81% this year is an accounting shift related to how the company records unredeemed gift cards. Cowen’s Andrew Charles would prefer to see Starbucks growing profits due to higher-margin beverages, but the accounting change in nonetheless worth keeping an eye on.

Altria Group Inc. shares were trading at $51.40 per share on Thursday morning, down $3.31 (-6.05%). Year-to-date, MO has gained 5.55%, versus a 17.48% rise in the benchmark S&P 500 index during the same period.